“The best thing money can buy is financial freedom.” - Rob Berger

Introduction:

Finance is the bread and butter of every business—big or small. However, sometimes a company can face monetary constraints and a shortage of funds, a common experience among start-ups and small businesses during the COVID-19 pandemic. In such a scenario, financing can help the company recoup.

Here, we list down the five reasons small businesses would seek financing:

1. Working Capital

Lack of working capital can seriously affect the future of your business. Sufficient working capital is a critical component of every firm's financial health. Financing helps your business grab on new opportunities, such as investing in new products or expanding your offered services. If you need a little more cash, working capital loans can provide the "cushion" you need to afford any unexpected costs. Seasonal firms benefit from working capital financing during off-season periods to support day-to-day expenses.

2. Asset Purchasing

An asset purchase loan can be utilized depending on what you need to fulfill your expansion plans. Whether you need to purchase your first service vehicle or expand your fleet, funds can be utilized for such a purpose. You can also request funding to buy new machinery or equipment to help you increase production while spreading the cost rather than paying a significant sum upfront. Likewise, the funding can also be used to purchase office and IT equipment to upgrade office operations.

3. Starting Up

Financing is essential for the start-up phase to get off the ground. While most business owners will use their own money to launch the firm, relatively few succeed in fully self-financing to profitability; as a result, they will need to look for outside capital. Bank loans, borrowing from family and friends, equity investments, crowdfunding, and funding grants are just a few options for start-up funding. Obtaining start-up money can be challenging, but once granted, you can use it for anything, from stock purchases to marketing to employee recruitment.

4. Debt Restructuring

If you need to restructure your business' debt, a loan that consolidates your borrowings and reduces costs will make finances more manageable for your business. A loan to restructure your existing debt can make financial planning easier by reducing the number of monthly repayments you have to keep track of and could potentially reduce your total monthly repayments. Refinancing your existing company debt can help your company grow by freeing up cash in your business for working capital and expansion.

5. Growth and Expansion

If you want to expand your business, you may very well need funding to carry out your business expansion plans. Growth financing is useful whether you wish to boost sales, broaden your selection of goods or services, relocate to a bigger facility, hire more staff, or open another branch. Whatever your plans are for business expansion, growth financing will help you take advantage of new opportunities. If your business has its daily running costs covered, external funding may be the solution you need to grow.